Encore Capital Gross Collections Rise 31%

San Diego-based charge-off buyer Encore Capital reported that revenues from the debt purchasing business during the fourth quarter were $65.0 million, a 20% increase the same period of the prior year. However, net income declined 15% year-on-year to $6.6 million. Gross collections for 4Q/06 were $94.5 million, a 31% increase over 4Q/05. During the fourth quarter, the Company spent $63.6 million to purchase $1.4 billion in face value of debt. Asset classes purchased in the fourth quarter included credit card, healthcare, auto deficiency, telecommunications and consumer loans. For the full year of 2006, the Company spent $144.3 million to purchase $3.7 billion in face value of debt. The Company also announced that its Board of Directors has authorized a securities repurchase program under which the Company may buy back up to $50 million of a combination of its common stock and convertible senior notes. For complete details on Encore’s latest results, visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com

ROAA Stays Healthy Despite Portfolio Metrics

Despite the uptick in recent delinquency and charge-off figures, U.S. bank credit card issuers are realizing a solid period of returns on average assets. During January the ROAA hit 2.66%, the highest level in more than five years, according to CardData ([www.carddata.com][1]). Rising cardholder fees, interest rates that move within 30-days of the Fed short-term interest adjustments and building balances have been key drivers to the new age of profitability. CA-based R.K. Hammer recently reported that return-on-assets for credit card portfolios for 2006 is projected to rise to 4.6%, compared 4.3% for 2005, and 4.5% for 2004. “Return on Average Assets” (ROAA) (%) is determined by dividing the after-tax return ($) by the average managed card outstandings ($) and then annualizing.

Return on Average Assets
Jan 06: 1.11%
Feb 06: 1.98%
Mar 06: 2.46%
Apr 06: 2.40%
May 06: 2.37%
Jun 06: 2.34%
Jul 06: 2.41%
Aug 06: 2.44%
Sep 06: 2.51%
Oct 06: 2.53%
Nov 06: 2.59%
Dec 06: 2.62%
Jan 07: 2.66%
Note: Excludes American Express and Discover.
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com

CompuCredit’s 4Q/06 Net Income Triples

Atlanta-based sub-prime card specialist, CompuCredit, reported GAAP net income for the fourth quarter of $9.7 million, triple the year ago quarter. Total managed receivables for the fourth quarter were $2,815,219,000, a 13% increase compared to one-year ago. As of December 31st, CompuCredit had 3,865,000 accounts, compared to 3,588,000 in 4Q/05. The adjusted charge-off rate was 11.0% in the fourth quarter, as compared to 11.2% for 4Q/05 and 9.4% in the previous quarter. As of December 31st, the 60-plus day delinquency rate was 14.1%, as compared to 14.0% for 3Q/06 and 9.3% for 4Q/05. The issuer said it expects first-quarter managed earnings to be significantly lower than the fourth quarter. For complete details on CompuCredit’s fourth quarter performance, visit CardData ([www.carddata.com][1]).

COMPUCREDIT NET INCOME SNAPSHOT
4Q/05: $ 3.0 million
1Q/06: $30.7 million
2Q/06: $28.3 million
3Q/06: $38.8 million
4Q/06: $ 9.7 million
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com

Retail Cards Face Higher Charge-Offs

Charge-offs for U.S. retail credit cards are set to rise this year as losses for bankcards head higher. In December charge-offs for retail cards bit 6.11% compared to 4.21% for prime and 9.23% for sub-prime bank credit cards. According to Fitch Ratings’ new “Retail Index,” charge-offs are continuing to normalize from the bankruptcy reform implementation in October 2005. However, retail delinquencies are currently at 3.88%, above the current 2.59% level for prime and below the 5.68% level for sub-prime. The retail segment exhibited a yield of 26.37% comparable to the 25.82% yield in sub-prime but significantly higher than the prime yield at 17.78%. As a result, the retail and sub-prime sectors show higher three-month average excess spread levels of 12.33% and 9.93%, respectively, despite higher charge-off levels. The retail card ABS sector includes both store cards owned by individual retailers and private label programs administered on behalf of retailers.

SunTrust 4Q/06 Credit Card Volume Soars 45%

Atlanta-based SunTrust posted a 36% increase in outstandings and a 45% gain in sales volume during the fourth quarter, compared to one-year ago. According to CardData, the nation’s 42nd largest bank credit card issuer had fourth quarter credit card outstandings of $340.1 million and credit card volume for the quarter of $679.5 million. The issuer’s accountbase grew 16.6% to 86,674 accounts. Cards-in-Force at year-end were 235,636, an increase of nearly 18% year-on-year. In December, SunTrust signed an agreement with InfiCorp Holdings for issuing consumer credit cards. Under terms of the agreement, InfiCorp will market, originate and service SunTrust-branded cards starting in the first quarter of this year. SunTrust will be engaged in the underwriting process for the new cards, and will have the option to purchase card assets for its own loan portfolio. In October 1999, SunTrust entered into an agreement with MBNA, which expires this month, under which MBNA purchased SunTrust’s consumer credit card portfolio and marketed personal card products and services to the bank’s customers. The business, corporate and purchasing card portfolios were not part of that transaction and continue to be maintained by SunTrust. For complete details on SunTrust’s fourth quarter performance, visit CardData ([www.carddata.com][1]). (CF Library 12/12/06)

OUTSTANDINGS
4Q/05: $249.9 million
1Q/06: $261.0 million
2Q/06: $292.8 million
3Q/06: $300.0 million
4Q/06: $340.1 million
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com

COF Card Profits Up 42% Y/Y; Slip Sequentially

Capital One’s fourth quarter U.S. credit card profits soared by 42% year-over-year but fell 27% sequentially to $337.2 million. Purchase volume in the U.S. was up 7.5% while U.S. managed card outstandings increased 8.3% from the year-ago quarter. The number of U.S. card accounts rose by about 150,000 during the quarter compared to about 300,000 in the prior quarter and total accounts remained flat year-on-year. U.S. card net income was $337.2 million, compared to $461.6 million in the prior quarter and $237.0 million for 4Q/05. U.S. managed card outstandings were $53.6 billion for 4Q/06 compared to $49.5 billion one-year ago and $51.1 billion in the previous quarter. Purchase volume hit $22.8 billion for 4Q/06, compared to $21.5 billion for 3Q/06 and $21.2 billion for 4Q/05. Capital One had 37.6 million accounts as of December 31st, compared to 37.5 million in the prior quarter and 37.6 million one-year ago. The managed delinquency rate (30+ days) for U.S. credit cards was 3.74% for the fourth quarter, compared to 3.53% for 3Q/06 and 3.44% for the fourth quarter of 2005. The net charge-off rate for U.S. credit cards was 3.82% for the fourth quarter, compared to 3.39% for the third quarter and 5.70% one-year ago. For complete details on Capital One’s fourth quarter performance, visit CardData ([www.carddata.com][1]).

COF U.S. CARD NET INCOME
4Q/05: $237.0 million
1Q/06: $602.8 million
2Q/06: $421.8 million
3Q/06: $461.6 million
4Q/06: $337.2 million
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com

JPM Chase Q4 Outstandings Rise 7% to $153B

J.P. Morgan Chase reported this morning that fourth quarter credit card profits rose to $711 million, compared to $711 million in the prior quarter and $417 million in the year ago quarter. Managed card loans were up 7% to $152.8 billion year-on-year and up 6% sequentially. Compared with the prior year, both average managed and end-of-period managed loans continued to be affected negatively by higher customer payment rates due to the new minimum payment rules and a higher proportion of customers in rewards-based programs. The managed net charge-off rate for the quarter was 3.45%, down from 6.39% in the prior year and 3.58% in the prior quarter. The 30-day managed delinquency rate was 3.13%, up from 2.79% in the prior year, but down slightly from 3.17% in the prior quarter. During the fourth quarter, the net accounts opened were 14.4 million, including 9 million from the acquisitions of the BP and Pier 1 Imports, Inc. private label portfolios. Charge volume of $93.4 billion increased by $13.8 billion, or 17%, from the prior year. Merchant processing volume of $177.9 billion increased by $24.5 billion, or 16%, and total transactions of 5.0 billion increased by 653 million, or 15%, from the prior year. For complete details on Chase’s fourth quarter performance, visit CardData ([www.carddata.com][1]).

JPM CHASE HISTORICAL ($billions)
4Q/05 1Q/06 2Q/06 3Q/06 4Q/06
EOP Outstandings: $142.3 134.3 139.3 143.8 152.8
Charge Volume: $ 79.6 74.3 84.4 87.5 93.4
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com

Morgan Stanley British Cards Rise 3% Q2Q

Morgan Stanley reported that credit card outstandings for its British MasterCards during the quarter ended November 30th rose by more than $100 million to $4.6 billion, a 3% sequential increase. Morgan Stanley also reported that its Discover unit posted pre-tax profits of $199 million for 4Q/06, triple its profits from one-year ago. Additionally, Morgan Stanley announced plans to spin-off Discover by the third quarter of next year. The quarter included $1.5 billion of managed loans associated with the February acquisition of the Lloyds TSB “Goldfish” credit card business in the U.K. The number of accounts for its “Classic,” “Gold,” “Platinum,” and “buy & fly!” cards inched up to 3.0 million from the prior quarter, but, is up by 400,000 since the acquisition. There are approximately 1 million “Goldfish” credit card accounts. MS introduced its first credit card in the U.K. in 1999. For complete details on Morgan Stanley’s latest performance, visit CardData (www.carddata.com).

Morgan Stanley to Spin-Off Discover Next Year

Morgan Stanley also announced this morning plans to spin-off Discover by the third quarter of next year. The nation’s fourth largest payment card network has made big progress in past few months inking several acquiring deals with major firms and expanding its acceptance outside the USA. Morgan Stanley’s last CEO, Philip Purcell, wanted to spin-off Discover early last year. Last year, the move could produce a business with a market value between $10 billion and $15 billion. However, the success of the MasterCard IPO may drive Discover’s market cap higher. Discover had 2006 annual net revenues of $4.3 billion and generated strong pre-tax profits of $1.6 billion in 2006. DISCOVER PROFITS 3Q/05: $ 65 million 4Q/05: $479 million 1Q/06: $541 million 2Q/06: $368 million 3Q/06: $199 million Source: CardData ([www.carddata.com][1])

[1]: http://www.carddata.com

Discover Profits Triple Y/Y; Sink Sequentially

Morgan Stanley reported this morning that its Discover unit posted pre-tax profits of $199 million for 4Q/06, triple its profits from one-year ago. However, sequentially, profits sunk from $368 million. Discover reported that net revenues rose 39% from a year ago to $963 million. Net sales volume was $24.5 billion, a 13% increase from a year ago, reflecting increased cardholder usage and the acquisition of the “Goldfish” credit card business. Managed credit card loans of $50.3 billion were up 7% from a year ago and up 1% from the end of the third quarter. Managed merchant, cardholder and other fees were $542 million, up 4% from a year ago. The managed credit card net charge-off rate was 4.15%, 161 basis points lower than last year’s fourth quarter, but 34 basis points higher than this year’s third quarter. The managed credit card over-30-day delinquency rate was 3.51%, 10 basis points higher than the third quarter of 2006, and the over-90-day delinquency rate increased 6 basis points over the same period to 1.65%. For complete details on Discover’s fourth quarter performance, visit CardData ([www.carddata.com][1]).

DISCOVER CARD PORTFOLIO SNAPSHOT
($ billions; accounts/actives millions)
4Q/05* 1Q/06* 2Q/06* 3Q/06* 4Q/06* Y/Y CHNG
Outstandings: $46.9 $47.8 $48.5 $49.6 $50.3 +7%
Volume: $26.1 $26.8 $28.5 $30.2 $29.1 +11%
Accounts: 45.5 46.1 45.9 45.6 45.3 NC
Actives: 19.2 19.6 19.6 19.6 19.8 +3%
Chargeoffs: 5.76% 5.06% 3.30% 3.81% 4.15% -161bps
Delinquency**:3.98% 3.45% 3.29% 3.41% 3.51% -47bps
Yield: 11.94% 12.13% 12.69% 12.38 12.23 +29bps
Notes: 4Q/05 ended 11/30/05; 1Q/06 ended 2/28/06; 2Q/06
ended 5/31/06; 3Q/06 ended 8/31/06; 4Q/06 ended 11/30/06
** delinquency is 30-90 days and excludes 90+ days. Includes both
domestic and international cards.
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com

Charge-Offs Show Upward Momentum in November

Charge-offs for managed outstandings edged up again in November by 10 basis points after a rocky year following the implementation of new bankruptcy rules last fall. The charge-off ratio has oscillated much of this year but seems to be on an upward trend as delinquency points north. According to CardData ([www.carddata.com][1]), charge-offs for November rose to 4.19% of managed outstandings, versus 4.09% in October and 7.03% one-year ago. According to FitchRatings, “prime” charge-offs for October were 3.78%, 10 basis points lower than the prior month but up 59 basis points since May. The “prime” 60-plus day delinquency index for October was 2.40%, compared to 2.33% in September.

CHARGE-OFFS 2006
Jan 06: 6.05%
Feb 06: 4.73%
Mar 06: 3.75%
Apr 06: 3.95%
May 06: 4.24%
Jun 06: 4.19%
Jul 06: 3.99%
Aug 06: 3.95%
Sep 06: 4.15%
Oct 06: 4.09%
Nov 06: 4.19%
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com

Charge-Offs Edge Higher in Oct for the 3rd Time

Charge-offs for managed outstandings edged up again in October by 11 basis points after a rocky year following the implementation of new bankruptcy rules last fall. This is the third consecutive month of increases in the charge-off ratio which bottomed out at 3.75% in March of this year. According to CardData ([www.carddata.com][1]), charge-offs for October rose to 4.26% of managed outstandings, versus 4.15% in September and 6.69% one-year ago. Moody’s “Credit Card Credit Index” for credit card-backed securities recently showed the delinquency rate has been climbing for the past three months. Last month, the 60+ day delinquency rate hit 2.54%, topping January by two basis points. According to CardData, delinquency for the October period hit 2.54%, compared to 2.45% in September and 2.57% one-year ago.

CHARGE-OFFS 2006
Jan 06: 6.05%
Feb 06: 4.73%
Mar 06: 3.75%
Apr 06: 3.95%
May 06: 4.24%
Jun 06: 4.19%
Jul 06: 3.99%
Aug 06: 3.95%
Sep 06: 4.15%
Oct 06: 4.26%
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com